Ikea to open string of smaller stores across Canada

Outlets one-tenth the size of a regular Ikea will be primarily for e-commerce pickups

Ikea Canada president Stefan Sjöstrand started his new job in September and has an ambitious vision for the company: “the pickup stores will be on the West Coast and all over the country” | Ikea

Swedish furniture giant Ikea plans to open up to 10 smaller stores across Canada within the year, Ikea Canada president Stefan Sjöstrand told Business in Vancouver December 9.

The locations would be similar in size to a standard London Drugs, at about 37,000 square feet, or a tenth the size of a full-size Ikea, but most of that space will be for storage.

Unlike a full-size Ikea, the new so-called “pickup” stores will have counters at which Ikea workers will retrieve items for customers who ordered online. Some of the company’s future pickup stores are likely to include small retail areas.

Ikea hasn’t released exact locations, but “the pickup stores will be on the West Coast and all over the country,” Sjöstrand said. “I hope that a year from now we will have five to 10 pickup points.”

A December 9 Forrester study, commissioned by Purolator, revealed that 73% of Canadians want to have the option to pick up online purchases in-store.

“Canadians like ordering stuff online and then picking things up in the store,” agreed retail analyst and Retail Insider Media Ltd. owner Craig Patterson. “It’s better for retailers to have people come into the store because then they can sell them additional products.”

Patterson added that it would be “brilliant” for Ikea to open smaller stores in the urban cores of both Vancouver and Toronto. The brand is well known in both those cities because of the longtime presence of full-size Ikea stores in the suburbs. And both cities have plenty of urban dwellers who do not have cars.

“Smaller [footprints] is the way to go,” Patterson said. “That’s a trend in general in retail. A lot of these large-format retailers actually want to shrink.”

He pointed to Loblaw Co. Ltd.’s (TSX:L) $12.4 billion purchase of Shoppers Drug Mart last year and said part of Loblaw’s rationale in buying the drugstore chain was to get some of its products into Shoppers’ smaller footprint locations.

BCE Inc.’s (TSX:BCE) $670-million plan to buy Burnaby’s Glentel Inc. (TSX:GLN) is another example of the trend toward smaller footprint stores, he added.

Glentel built a network of more than 1,100 small-footprint wireless-products stores at a time when sales were falling at big-box electronics stores as customers browsed in-store and then ordered online at sites such as Amazon.com Inc. (Nasdaq:AMZN).

Steadily rising e-commerce sales now account for 5% of Ikea Canada’s $1.7 billion in annual revenue, and all of those transactions have so far involved products shipped directly to customers from distribution centres, Sjöstrand said.

That’s unlike chains such as Burnaby-based Best Buy Canada, which has started to roll out in-store pickup areas for those who buy online.

“Typically, these areas are at the front of our stores,” Best Buy Canada president Ron Wilson said in an October speech in Vancouver. “People told us, ‘You’re crazy. Put them at the back of your store. Then people have to walk all the way through your store.’ We didn’t do that because people who order online are in a hurry.”

Sjöstrand, however, believes that the strategy of opening specialized pickup stores is more efficient than opening pickup areas in existing full-size Ikea stores because the company’s current stores are at capacity.

Besides, the point of having specialized and small pickup stores is to have more distribution points and easier access for customers.

Sjöstrand hinted that some full-size Ikea stores, however, could help with e-commerce fulfilment in the future as a way to speed delivery.

Most of Richmond-based London Drugs’ e-commerce order filling is done from its stores.

“In the stores you have cases broken down into single units, or ‘eaches,’” London Drugs chief operating officer Clint Mahlman told BIV.

“Shipping out of that store means we can be faster and we’re often able to reduce shipping costs because we can get fulfilment closer to the customer address.” •